Investment Highlights

We maintain our forecasts, HOLD call and FV of RM2.62 based on 13x fully diluted FY18F EPS, in line with the average forward PE of major global key smelters.

Press Metal’s (PMB) 1QFY17 results came in within expectation at 23% and 24% of our full-year forecast and consensus estimates respectively.

1QFY17 EBIT grew 45% YoY underpinned by: 1. Additional production from new smelting plant. Samalaju phase 2 (PMB annual capacity for FY17 760K MT, FY16 705K MT) 2. Better metal price in FY17. The aluminium ASP in 1QFY17 (US$1,930/MT) was higher than 4QFY16 (US$1,731/MT). The improvement in ASP was due to the ongoing cuts of aluminium production in China by its government to address the environment-related issues such as pollution.

We continue to like PMB because: 1) it is one of the dominant local aluminium players in the local market; 2) ASP is expected to improve driven by the ongoing China reforms to cut aluminium supply, and the country’s steady demand growth particularly from infrastructure projects and automotive segment; and 3) low production cost which enables PMB to maintain better margin than its competitors.

However, we believe the current share price has very much reflected PMB’s fundamentals.

Source: AmInvest Research - 19 May 2017